Stock markets continued their recent intra-day volatility over the past 24 hours as the divergence between the German DAX and the US Equity markets narrowed again yesterday with the DAX closing down 0.6% on more Greek worries. Meanwhile the S&P which was down nearly 0.75% at one stage closed 0.6% higher helped by better US Housing data. The AUD got a boost from some moderately encouraging resource commodity news out of China with Iron Ore Spot prices finding good support for once after the drubbing this market has had all year with Iron Ore closing nearly 6% higher.
Elsewhere markets were relatively orderly. The Pound climbed in the aftermath of the release of the Minutes from the Bank of England April Meeting. While the vote to hold rates steady was unanimous, the Minutes revealed that keeping Interest Rates at a record low was a ‘finely balanced’ decision for a minority of officials. UK Gilt Yields rose as did Sterling which gave a bid tone to US Treasury Yields into the open of the US markets.
Treasury Yields rose further after the US released its House Prices which rose a higher than expected 0.7% in February after the previous month’s 0.3% rise. This was followed by Existing Home Sales which came in at an impressive 5.19m for March for a 6.1% increase in comparison to the previous month’s 4.88m.
This morning on the economic front we already had the release of the HSBC China Manufacturing PMI which came in at 49.2 versus 49.6 expected. This weak print is seeing European Indices opening lower with the DAX especially weak on the release of the German Markit Manufacturing PMI April release which has just come in at a weak 51.9 versus 53.0 expected.
At 9.00 we have the Euro-Zone Manufacturing and Services PMI, while at 9.30 am we have the UK Retails Sales and Public Finances. This is followed by US Weekly Jobless Claims and US Markit Manufacturing PMI at 1.30 pm and 2.45 pm respectively. At 3.00 pm we have New Home Sales while finally at 4.00 pm the Kansas City Fed Manufacturing Activity is released.
June S&P 500
The S&P had another very volatile intra-day trading session yesterday. Unfortunately I tried to be too clever with my buy level at a too low 2076 as the low was only 2080 before the market had a 20 handle rally and I am still flat. Yesterday was another example of how you can only be short this market for a few hours as buyers returned with aggressive buying soon after the US markets opened. I have to respect the fact that the S&P managed to close again over the key 2090 pivot point and today for this reason I will raise my buy level to 2084/2089 with a 2078 stop. If I am taken long and subsequently stopped out I will be a more aggressive buyer on any further dip lower to 2065/2070 with a tight 2062 stop which is just below last Friday’s 2064 low print. I do not have any real interest in going short the S&P at this time as every dip is getting bought and I will leave my sell level unchanged at 2109/2114 with the same 2117 stop.
EUR/USD
The Euro is proving very difficult to trade at this time especially with something that we have seen so far in 2015 namely both the DAX and the Euro trading lower on the same day. Obviously the German Manufacturing PMI released earlier this morning is having an impact and this has led to the Euro trading back below 1.07. However I cannot get Dragi’s comment over the weekend that it is ‘pointless’ to be short the Euro out of my mind as nearly everything time he has commented on the Euro the market has reacted. Yesterday after I posted the Euro traded lower to my 1.0720 buy level. I am still long and I will leave my stop the same at 1.0655. The 1.0810/1.0840 area is proving to be a very strong resistance to break and if the Euro trades higher again to this level I will be a small seller in this area with a tight 1.0870 stop.
June US Dollar Index
After I posted yesterday morning the Dollar started to rally again with the market eventually hitting my 98.45 sell level. I am still short and I will leave my stop the same at 98.90 on this position.
June DAX
The volatility in the DAX over the past seven days has been staggering. There is no doubt that the lack of liquidity is playing its part. My short 12030 DAX position taken yesterday morning worked out very well as soon after I posted the DAX got hit hard to the downside which enabled me to cover this position at 11890 and I am now flat. Already this morning the DAX has traded to an 11975 high and then fallen over 200 points on the German Manufacturing PMI release. The DAX will have mild support at last Friday’s 11640/11680 support zone and if this level is broken the DAX has very strong support from 11480/11530. Today I will be a small buyer on any further dip to 11670/11730 with a wider 11625 stop. Given the volatility I have to trade in smaller size with wider stop. If over the next few days the DAX trades into the 11480/11530 support area mentioned above I will be a more aggressive buyer with an 11430 stop.
June FTSE
I am still flat the FTSE as overnight the market has just missed my 7025 sell level with a 7012 high. This morning I will lower my sell level slightly to 7015/7040 with a tight 7065 stop.
Dow Rolling Contract
The Dow plan worked out well as yesterday evening the Dow rallied to my 18040 sell level before having a nice sell-off this morning which has enabled me to cover this position at 17960 and I am now flat. I will continue with my strategy of selling rallies in the Dow and today I will again look to go short on any rally higher to 18030/18080 with an 18110 stop.
June BUND
Yesterday was very frustrating as just like the S&P above I tried to be too clever with getting a Bund short position on board. It was frustrating as the Bund just missed my 160.25 sell level by 6 points before falling over a 100 points and I am still flat. This morning the Bund is rebounding and today I will lower my sell level to 159.70/160.00 with a 160.25.
Gold Rolling Contract
Gold is again trading heavy as this market is having huge difficulty in taking out the 1220/1230 key resistance level. Yesterday after I posted Gold traded lower to my 1191 buy level. I am still long and I will leave my stop the same at 1183 which is just below the overnight low at 1184.
Silver Rolling Contract
Shortly after lunch yesterday Silver traded lower to my 15.75 buy level. I am still long and today I will raise my stop on this position to 15.45.
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